CSR, philanthropy, ESG and sustainability: what’s the difference?

In India, corporate social responsibility (CSR) is a legal duty: companies above a size threshold must spend at least 2% of their average net profit on activities listed in Schedule VII of the Companies Act, 2013. Philanthropy is voluntary giving, ESG is how investors and regulators judge the way a whole business handles its environmental, social and governance risks, and sustainability is the broader goal of meeting today’s needs without harming future generations.

The four overlap, and people use them loosely, sometimes interchangeably. In India the differences matter, because only CSR comes with a legal minimum, a list of eligible activities, deadlines and penalties. This guide defines each term, shows where they meet, and explains the mistakes that come from mixing them up. It’s for CSR and sustainability teams, NGOs that work with them, and students.

Four terms, defined

CSR

In everyday speech, corporate social responsibility means a company taking responsibility for its effect on society. In Indian law it means something precise: the activities a company undertakes “in pursuance of its statutory obligation” under Section 135, following the CSR Rules (Rule 2(1)(d)). A company that, in the previous financial year, had a net worth of ₹500 crore or more, a turnover of ₹1,000 crore or more or a net profit of ₹5 crore or more must spend at least 2% of its average net profit for the last three years on activities in Schedule VII, and report what it spent. See what is CSR.

Philanthropy

Philanthropy is voluntary giving of money, time or assets for the public good, by individuals, families, foundations or companies. No law requires it. Tax law encourages it: donors can claim a deduction for gifts to approved charities under Section 133 of the Income-tax Act, 2025 (formerly section 80G), within limits, though individuals can claim it only under the old tax regime. See tax deductions for donors.

ESG

ESG stands for environmental, social and governance. It is a way of looking at how a whole business is run: its emissions, energy, water and waste (environmental); how it treats workers, communities, customers and human rights (social); and how its board, ethics and disclosures work (governance). Investors use ESG information to judge risk and long-term value. In India it is reported mainly through the Business Responsibility and Sustainability Report (BRSR) required by SEBI, the markets regulator, which also regulates ESG rating providers and ESG funds. See ESG explained.

Sustainability

Sustainability is the broadest of the four. In 1987 the United Nations Brundtland Commission defined it as “meeting the needs of the present without compromising the ability of future generations to meet their own needs”. For a company, it means running the business so that it can last without using up the natural and social resources it depends on. The 17 Sustainable Development Goals are the world’s shared agenda for it; see CSR and the SDGs.

How they compare

Section 166(2) of the Companies Act is worth knowing: it requires every director to act in good faith in the best interests of the company, its employees, the shareholders, the community “and for the protection of environment”. Responsible business is a duty of the whole board, not just of the CSR committee.

What each looks like in one company:

Where they overlap

The four meet in several places:

• CSR feeds ESG reporting. The BRSR’s Section A asks whether CSR applies to the company under Section 135, with its turnover and net worth. Under Principle 8 (inclusive growth), voluntary leadership indicators ask about CSR projects in aspirational districts and how many beneficiaries of each CSR project come from vulnerable and marginalised groups. See the BRSR explained.
• CSR can serve sustainability. Item (iv) of Schedule VII covers environmental sustainability, ecological balance and the quality of soil, air and water, so a company can fund reviving village ponds or restoring forests as CSR.
• CSR can look like philanthropy. A company can spend more than its 2%, and the excess, with a board resolution, can be set off against the next three years. It is still CSR, run under the company’s CSR policy.
• All four use the SDGs as a shared language. CSR teams often tag each project with its Schedule VII item, for eligibility, and with one to three SDG targets, for the change they want.

The line CSR can’t cross: the business itself

The biggest difference is that ESG and sustainability are about how a company runs its own business, while CSR, under Indian law, deliberately excludes the business. Among other things, Rule 2(1)(d) of the CSR Rules leaves out activities in the normal course of business, activities designed only for the company’s employees, sponsorship for marketing benefit, and anything done to meet another law.

The right-hand column is often good ESG and sustainability practice, and worth reporting in the BRSR. It just can’t be paid for out of the CSR budget or counted towards the 2%. Our guide to what doesn’t count as CSR has the full list.

Why mixing them up causes problems

Counting business costs as CSR

A company that books pollution control, staff welfare or a sponsorship as CSR hasn’t spent that money on CSR. If the rest of its spending falls short of the obligation, the shortfall must be transferred to the Unspent CSR Account or a Schedule VII fund, and missing those deadlines brings penalties on the company and its officers. Keep separate budgets and records, and tag every CSR project to its Schedule VII item.

CSR-washing

CSR-washing is using CSR projects to look responsible while the business itself does harm, or presenting CSR spending as proof of good ESG performance. A water project run by a factory that over-draws the same aquifer, or a lake clean-up by a company whose quarry is draining village wells, are examples. Reporting outputs, such as saplings planted, as if they were impact is a milder form. The cure is to report the business’s own effects alongside its CSR, and to measure CSR by what changed, not by what was spent.

Treating philanthropy as CSR

A promoter’s personal gift, however generous, isn’t the company’s CSR. Nor are some things that look like giving: contributions to an organisation’s corpus (endowment) haven’t counted as CSR since 22 January 2021, products given away can’t be valued and counted, and employees’ volunteering time can’t be given a rupee value (FAQs 3.5, 3.12 and 3.18 of the Ministry of Corporate Affairs’ General Circular 14/2021).

Mixing up the tax rules

CSR isn’t a tax break. Under Section 34(2)(b) of the Income-tax Act, 2025 (formerly Explanation 2 to section 37(1) of the 1961 Act), CSR spending isn’t deductible as a business expense, and whether a company can claim a donation deduction for CSR contributions is contested, so take tax advice. Individual donors’ deductions under Section 133 are a separate matter. See CSR and income tax.

What it means for NGOs

NGOs often deal with all four kinds of money, and each comes with different expectations:

• CSR teams need projects that fit Schedule VII and the company’s annual action plan, run by an eligible, CSR-1 registered agency, with utilisation reports by 31 March and evidence of outcomes. See how NGOs can get CSR funding.
• Philanthropists and foundations can be more flexible about what they fund. Donors who want a tax deduction need you to hold approval for donors’ deductions (Section 354 of the Income-tax Act, 2025, formerly 80G), and foreign donors raise questions under the FCRA.
• Sustainability and ESG teams may want help with community engagement, grievance mechanisms or data on the people their business affects. That is often paid work for the company’s own operations rather than a CSR grant, so agree which it is at the start.

Getting the language right

• Use CSR for the legal programme under Section 135, with its 2%, Schedule VII and reporting.
• Use ESG or sustainability for how the business itself is run, and report it in the BRSR.
• Use philanthropy or giving for voluntary donations beyond the legal programme.
• Don’t claim ESG performance from CSR spending, or SDG achievements from outputs.
• Keep separate budgets, records and reports for each.

The Academy’s CSR Essentials course covers CSR in depth, and the SDGs and India covers sustainability reporting and the goals.